Why do spouses hide income?

This paper proposes a simplified model of intrahousehold decision making where cooperative and noncooperative behavior are not mutually exclusive. Individuals choose the optimal share of income they wish to devote towards cooperation, where income is pooled and allocated collectively, and towards noncooperation, where income is allocated independently. Using the example of joint saving as an area of household cooperation, this model shows how limited autonomy and bargaining power can interact to create incentives for individuals to hide income. This result provides theoretical support for the call to collect survey data separately from individuals rather than from household representatives.

► Intrahousehold decision making is modeled as a continuum between cooperative and noncooperative behavior. ► Limited autonomy and bargaining power interact to create incentives for individuals to hide income. ► Women in patriarchal regimes and men in matriarchal regimes have an incentive to hide income. ► If men earn more than women, matriarchal regimes result in more cooperation. ► Financial data must be collected individually to capture privately held information.